A House Senate conference committee working on oil spill legislation agreed Thursday to phase out all single hulled tankers by 2010 and replace them with vessels outfitted with double hulls.
While double hulled tankers are much less likely to spill their contents in an accident, the added environmental protection from a safer fleet will have a price tag for Alaska, where oil revenues finance 85 percent of the state budget.
According to an analysis of the provision by BP Exploration (Alaska) Inc., provided to the Senate Commerce Committee Wednesday, double hulls will cost North Slope oil producers more than $2 billion in additional transportation expenses over the next two decades. That's about as much as cleanup and other expenses from the Exxon Valdez spill cost Exxon in a single year.
The increased transportation costs will reduce the wellhead value of North Slope crude, which will reduce the state of Alaska's oil revenues by between $600 million and $800 million over the twodecade period, BP estimated.
That's an average of $30 million to $40 million annually. David Ramseur, a spokesman for Gov. Steve Cowper, said Department of Revenue estimates of the cost to the treasury are less than BP's ranging between $5 million and $20 million a year.
The state budget this year totals about $2.5 billion.
"We made a conscious decision knowing full well the cost to the state," Ramseur said. "It's well worth it, given the additional protection to the environment."
Cowper hailed the conference committee's action Thursday, saying it was long overdue.
"In the 16 months since the Exxon Valdez ran aground, millions of gallons of oil have continued to spill from tankers along every coast of this country and throughout the world," Cowper said in a statement. "Much of the environmental damage caused by those spills could have been prevented had the ships been equipped with double hulls."
Sen. Ted Stevens, RAlaska, said the cost to the state represents its premium on a $1 billion oil spill clean up and compensation "insurance policy" the federal legislation also will create.
"When you consider we'll be getting a billion dollars in insurance coverage, it's not too much to pay," Stevens said.
The Coast Guard estimated after the Exxon Valdez ran aground in March 1989 that the spill of almost 11 million gallons that it caused in Alaska's Prince William Sound could have been cut by 60 percent if the tanker had been built with a double hull.
Under the provision accepted Thursday, the Coast Guard would have no flexibility to permit exceptions to the double hull requirement, although it could urge Congress to change the law if the National Academy of Sciences determines in a report due out in December that other alternatives are more effective in stopping tanker spills.
With about 160 domestic tankers carrying oil products in U.S. waters, the legislation is expected to trigger a boom in the shipbuilding industry.
Even those tankers with double hulls that are in operation now would have to be replaced by the year 2015 under the provision approved Thursday. By that date, no tanker older than 25 years would be allowed to sail.
John Stocker, president of the Shipbuilding Council of America, predicted Thursday that the legislation will result in the construction of as many as 70 new tankers by the end of the decade.
"There is a tendency in the U.S flag fleet to run vessels as long as possible," Stocker said. "Now that there's a mandate, with a higher environmental standard, it will lead people to make decisions that they wouldn't have otherwise made."
Under the provision, 45 percent of the domestic tanker fleet would be phased out of service by the year 2000, 85 percent would be retired by 2005 and all singlehulled vessels would be replaced by 2010.
The provision gives an extra five years of life to existing tankers with double sides or double bottoms. But even those, regardless of age, would have to be replaced by 2015 if they were in service on the date of the bill's enactment.
Stevens said he thinks tankers in the Alaska trade will be the first to be replaced because so much of the nation's oil comes from his state and because Alaska has laws holding oil spillers fully liable for damages.
"I believe the new double hull tankers will be brought into the Alaska trade as fast as they can get there," Stevens said.
About 85 tankers are eligible to operate in the Alaska trade, although not all do so. The oldest of those tankers, the Texaco Minnesota, was built in 1943 and is rated at about 10,000 gross tons a relatively small vessel. Under the legislation, it would have to be retired by 1995.
But most of the tankers and all of the larger ones operating in Alaska were built in the 1970s or later.
The Exxon Long Beach, the newest and among the largest in the Alaska trade, entered into service in 1987. The singlehulled vessel would be able to stay in service until 2010.
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